Enterprise Group, Sanlam part ways after US$130m sale
South African insurer, Sanlam, has exited the Enterprise Group after a US$130 million sale to Prudential Financial Inc., a Fortune 500 company headquartered in America.
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The deal was motivated by differences among Sanlam and Enterprise Group over expansion plans. Its successful conclusion now sets a path for the Ghanaian insurer to venture into other business lines and countries, the group’s chief executive officer (CEO), Mr Keli Gadzekpo, said in an interview.
Black Star Holdings, Prudential Financial’s special purpose vehicle (SPV) managed by Leapfrog Investments, led the acquisition process, which was approved by regulators, including the Ghana Stock Exchange (GSE) and the National Insurance Commission (NIC), in the week ending June 23.
The approval brought to an end a partnership that dates back to the mid 2000s. It, however, sets in motion a new relationship that will see Ghana’s leading life insurer tap into the expertise and financial clout of a global big player.
Mr Gadzekpo said the sale was a vote of confidence on the management structure of the business and “a joyous transaction” that would create value for all the stakeholders including staff and customers.
He explained that Prudential’s acceptance to pay US$130 million for Sanlam’s interest in the subsidiaries meant that the Enterprise Group, in the eyes of the buyer, was worth around US$250 million and not the less than US$40 million value placed on it on the GSE.
“This means that Enterprise Group can now speak to a valuation of $250 million. So, the value of the paper which shareholders have in their hands called shares has gone up just by this transaction,” he said.
Strategic divergence
Until the sale, Sanlam, a lead insurer in South Africa, held a 49 per cent stake in Enterprise Life and 40 per cent each in Enterprise Trustees and Enterprise Insurance, the pensions and general insurance wings of the group respectively.
Although a “successful partnership,” Mr Gadzekpo said growth and the need for expansion caused the two institutions to begin to “diverge strategically” hence the decision to part ways.
“Sanlam, for us, have been first-class operational partners. However, we noticed a sense of divergence on our strategies on the future, in the sense that we are anxious to grow into certain business lines here in Ghana and also offer ourselves in other countries,” he said.
“Sanlam does not have a difficulty being in those countries except their approach; what they want to do and how they want to get there is different from Enterprise. So, once we noticed that we started discussing with them to see where we could find a common ground,” he said.
Those discussions, he said, led to the search for a partner that could help the group to move to its next level of growth.
He described the transactions leading to the sell-out as mature and fruitful discussions that lasted over a year and led to the coming on board of the Prudential brand.
Other benefits
Beyond the US$130 million paid to Sanlam, Mr Gadzekpo said the new shareholders had also pledged capital up to US$50 million that could be used to retool the subsidiaries and actualise their expansion plans.
The amount is to be raised later through various capital-raising exercises that would be approved by shareholders, he said.
He was particularly impressed that the new shareholders operate in all sectors that the group has subsidiaries in, explaining that such a partner strengthens the company
Going forward, the CEO said the group would remain a listed company, playing a lead role in the insurance business.
Enterprise has been in operation since 1924 but later expanded into the properties, life insurance and pensions business, which are now envisaged to be its growth drivers.
2016 Performance
Last year, the group’s profit rose to by 24.2 per cent to GH¢68 million due to a combination of strong growth in premium income and a moderation expense.
Net income, which was GH¢349.3 million in 2015 rose to GH¢420.6 million in December, last year, representing a 16.9 per cent growth within the 12-month period.
Total assets also rose by 22 per cent, from GH¢633.5 million in 2015 to GH¢812.1 million in 2016.
The strong performance impacted positively on the group’s earnings per share, causing it to improve to GH¢0.257 in 2016 compared to 2015 when it was GH¢0.207.